PERFORMANCE BOND-BUT NOT JAMES BOND

Performance bond will not do miracles as James Bond but it will really make your job and life less stressful especially in the current financial problems all over the world. Last week I had several talks with contractors/vendors who were very eager to receive 100 % advance payment before ordering supplies but nobody wanted to hear about presenting performance bond ( I don't mention advance payment guarantee now). And the explanations were "we are too famous, we are with a strong position on the market"! Famous, strong-GMC, Lehman Brothers were also famous and strong just 10 days before collapsing!

Why do we need performance bonds? They are hedge against potential lien claims and failure to complete the work. When do we receive them? Right after award of the contract, before starting any works.

Under a performance bond, the surety has an obligation to the client for any additional costs to complete the contract due to the contractor's failure to comply with its contract requirements. The most common reason for a contractor not completing a contract is insolvency-very likely nowadays. Therefore, sureties are interested in the contractor's financial condition as well as other qualifications before writing a performance bond. Generally, a contractor's ability to take a large contract is a function of bonding capacity, as the bonding company will only risk a slight increase over previous bond amounts.

The position of the main contractors is the same when they want a performance bond from their subcontractors. Main contractors must obtain bonds from their subs that are of the same form and not less than the guarantee that the main contractor is giving the client under the client's own bond.

The performance bonds are written in the amount of 10-100 % of the contract price (what is your experience with these percentages). 

So, it's up to you if you want to count on the contractor's record of performance and not to obtain a performance  bond or ask for  receiving a performance bond and have a trouble-free job.